A. The Senate Inquiry into adding email addresses in the Members Register - an overview
B. The auditor (Deloitte) should be worried - two members following this one up
C. We do not want a whitewash
D. Lets get this board spill asap

A. The Senate Inquiry into adding email addresses in the Members Register- an overview.

Here are my thoughts following the Senate Hearing today into the modernisation bill which aimed to add the email address to the members register

1. Good to see the democratic process at work regarding the legislative process. Senators Hume and Xenophon were both very good in asking questions of all the speakers. Senator Dastyari seemed to have other things on his mind but asked good questions when there. They were all unimpressed with the Singapore AGM but I would think if they only knew more of some of the things that have been exposed over the last 6 months they would be shocked.

2. I think having the board sit before the senate Inquiry and answer a few tough questions would be a good thing.

3. Nick Xenophon is pretty impressive the way he can easily move from one inquiry to another, and from one topic to another with the media. A sort of a west wing on steroids but perhaps that's just a reflection of being introduced to a world that is new to me.

4. It's a very fair process. 10 written submissions were provided which are available in the Senate website. 5 who made written submissions also made a short verbal presentation on the day (Myself, CPA, AICD, GIA, ASA) and then answered questions of roughly 30 minutes from the senators. ASIC also finished it off but they did not provide a written submission not did they make a verbal presentation, and to be quite honest they might as well not have turned up to answer questions as they are so guarded and defensive and seem intent on preserving or protecting their secrecy that their reputation as the powerful but silent regulator missing in action is perhaps the best description I can think of.

5. All the presentations will be in Hansard in a day or two so you can ‘read all about it’ there.

6. One question that has been in the back of my mind since the hearing is I wonder if the corporate governance at the membership organisations there AICD, GIA, ASA, shared any of the same depressing traits that are evident with CPA. I would guess so given that the Chair of the AICD came out in the papers yesterday acknowledging (in a defensive but not contrite manner) that they would not fully disclose remuneration of their senior management because of confidentiality agreements. That to me is just double talk along similar ones to what the CPA Board have said in relation to Alex Malleys $4.9 million payout. It sounds so professional and reasonable but in reality is just double talk. Why the heck did they ever agree to sign a CEO on a confidentiality clause for a membership organisation. It's just a very nice way of missing the while point. So that’s why I wondered the same with the ASA and the GIA representatives there. I would surmise that the ASIC corporate governance model would be pretty bad also given their history. I know a review was done of this a few years ago and I just don't have the time to go over but my guess is that nothing has changed because it's performance (or lack thereof I should say) speaks volumes.

How is i that these membership organisations which purport to profess expertise and flying the flag of maintaining high standards within their membership, and the marketplace, can exhibit such poor standards themselves in their own organisations.
Everyone nows that publicly listed companies have to disclose the full remuneration of their senior staff and the board, yet for some unknown reason these membership bodies who wish to have some sort of credibility voice in the marketplace (AICD and GIA in governance and with directors, CPA and CAANZ in accounting standards and reporting, ASA with shareholders) yet dont quite live up to it themselves.

7. My initial thoughts on the speakers and their presentations is as follows

a. Brett Stevenson - brilliant. Just kidding. I thought I perhaps didn’t focus enough on the actual amendment but best to let others assess the merits of what I said.

b. CPA - Stuart Dignam plus another person. Obviously in the hot seat given that CPA’s governance failure was the catalyst for this amendment. The senators have requested that the CPA board be called to ‘answer’ to the inquiry when Stuart started to defer to board decisions on some bad decisions. I tend to think anything they may have said in their submission and possibly at the hearing was overshadowed by their lack of credibility because of the CPA leadership failure. The best I can say is that at least Stuart Dignam was prepared to face the panel and answer the questions.

c. AICD - I missed most of this but caught the tale end where one of the presenters spoke of the need to perhaps tighten up the proper purpose test for people who wanted to access the Members Register. That made a lot of sense to me, although fraught with adding more complication and legislation. I think most recognised the danger of the Members Register being misused. I'm not as convinced on the threat or dangers that email addresses pose. I tend to feel actual physical address is a more worrying security and privacy risk (and that is a reality now whether the amendment is adopted or not). An email address is just that, an electronic/digital address, you can always delete and unsubscribe etc. not quite so easy with a physical address. I thought this was lost a little in the whole hearing.

d. ASA - I think there were more concerned with the 10% of their members who prefer printed materials and use information traditional mail, that the picture of the tail wagging the dog comes to mind. Most can recognise that or everyone has an email address, and it is impossible to force someone to provide what they do not have. So clearly that is a reality that the legislation will need to deal with. But I thought the ASA’s position was so concerned with their 10% of members that they had lost sight of the forest for the trees. Dean Paatsch’s reference to the ‘blue rinse’ brigade came to mind.

e. GIA - I thought their position and arguments perhaps the most specious on the day. Making mountains out of the administrative hassles and overplaying the security risks. But in so doing denying the reality that business communication by traditional mail is already falling off the cliff and it is on its way down now. Perhaps typewriters might not be out of place in their offices.

f. ASIC - might as well have stayed at home for their presentation. Nick Xenophon tried to prise something out of them but it was a closed shop. I’m not to sure why they attend. I can now understand why the senate asked for a Senate Inquiry into ASIC’s performance in 2014. Perhaps the recommendations from that review need to be revisited to see just what has changed. If anyone asked me how to score ASIC based on their performance at the hearing today I would be pushed to give them more than 1 out of 10.

8. Conclusions - some very rough ones

i. Fair to say that most (though not all) of the submissions saw there was a need for some modernisation and recognition that email communication was a reality. But I felt they overemphasised the dangers and risks, and administrative hassles, that they lost sight of the real benefits of embracing email addresses in the Members Register. Things such as the benefits of cheaper, effective and fast communication, better governance, better member engagement and participation as well as the reality of it being the primary mode of company communication today was lost. I would think organising such an event as today's hearing without the benefit of email transmission would have been almost impossible task, or perhaps more correctly a to more time consuming and much slower. Can you just imagine if people had to make submissions on paper and send them in by mail.

ii. The reality that business communication by traditional mail is on a dramatic decline, so dramatic that APO regard it as about to fall off a cliff. The main users of traditional mail are governments and that is about to reduce by 70%. Just have a quick glance at the 2015 report Digital Post: Business transformation and the future sustainability of Australia Post, to catch some idea of the reality that is hitting us now. But I felt that while listening to the membership groups (ASA, GIA, CPA, AICD) that this reality had escaped them. Therein lies a very clear message I would suggest. The 21st century is ow and it beckons the membership organisations to come thither (sorry I just couldn’t avoid using an archaic word to capture something of the folly of what I felt I was seeing).

iii. One does not need to be especially perceptive to recognise that there are practical difficulties in collecting email addresses and that some people will not wish to disclose them even if they have them. But that is their problem, not the legislations. Legislation needs to adapt to the times in which we live not keep focussing on the lowest common denominator or the group most resistant to the need for change. The benefits of electronic communication far outweigh any disadvantages. I would hardly think that the 10% of ASA members who prefer to receive printed material, or the 66% of AMP clients who will not provide or don't have email addresses (out of a client base with an average age of 75 I should add), or the GIA which seems unbelievably focussed on the cyber risks of email as if email is a new phenomenon to which most of us are unaware, is a true reflection of the reality of business communication today, and it would be sad indeed if their concerns on minutae outweighed the obvious need for this amendment.

iv. I personally think the biggest privacy risk is in relation to people having one’s personal address (which is the reality with the current Members Register), and regard having one’s email address as a more minor risk. Sure there may be the danger of spam, but crikey you can delete it, have spam filters, change your email address etc. A wee bit harder to do that with your physical address I would suggest. In terms of being a privacy issue I would regard emails as a second tier concern. I thought this was not emphasised enough at the hearing yesterday.

v. What about ASIC? It was not very pretty insofar as helping anyone understand anything. That is perhaps the most troubling thing of all in this given that they are the corporate regulator. I suggest that the recommendations from the Senate Review into ASIC in 2014 should be revisited to just see which of them have been implemented and what changes have occurred. My thoughts insofar as they carry any weight is that there needs to be a paradigm shift in the way ASIC operates with regard to being the corporate regulator - it needs to be much more proactive, more public and more supportive of those who expose possible wrongs. From where I sit is is as if they call for submissions or complaints etc from people, and then they just disappear into ASIC, and one never knows if they are being looked at, what they are looking at etc.It’s a communication blackhole, and the people who have endeavoured to do the right thing by reporting on these matters are just left in the dark, and yet they are perhaps the most vulnerable. I know that the actual governance framework for ASIC itself has come under scrutiny in the past, and perhaps it needs to again if it continues in the same way as it seems to be doing currently. It may be subject to the same criticism as many member organisations in this regard (with CPA leading the pack) of preaching to others what it does not adhere to itself.

vi. The federal government had an inquiry into the impact of technological change on shareholder/company communications last year. Two of the submissions here included some aspects of their submissions to that review (GIA and AMP). Suffice to say here that the consensus that seems to have come out of that review, and the words were repeated today, were that technology neutrality was the way to go with communications. I can sort of understand what they are saying but the reality is that whenever I hear people use the term it usually means that the status quo of traditional mail is regarded as the norm and/or the common denominator. A sort of ‘we mustn’t pick sides mentality’ when the reality is that business and society has already picked sides. Many of the submissions spoke in such glowing terms of technology neutrality I felt they were going to break out in a song and dance to praising the merits of good old traditional mail and sending printed materials as opposed to electronic to the drumbeat of technology neutral. Sounded too much like a dirge of ‘lets maintain the status quo no matter what’.

vii. The three most likely modifications to the amendment, and these were positive with some caveats I thought, were

a. to put more detail in the legislation about what proper purpose is for those wanting to access the Members Register. One of the AICD representatives suggested this and as I said above it makes a lot of sense. his amendment is not trying to open the floodgates for anyone to access the register rather it is to ensure that only those with a proper purpose, but that when they do it provides information that makes communication both possible and realistic (i.e. email addresses). My only caveat on that would be that you can never think of every possible proper scenario in legislation and that people will be able to get around them where too prescriptive. But perhaps there is a way, and if there is then great.

b. to use a possible third party (or even the company itself) to keep the members register but to ‘facilitate’ any communication between the membership and the person requesting access. Clearly the main issue here is to ensure that the company does not become a censor to that communication. But the clear advantage is that the actual members register is not provided to the person or group. This resolves many of the privacy concerns.

c. to allow for those who do not have and/or will not provide their email addresses.
That seems pretty common sense to me. Can’t provide what you don't have, and can’t force people to communicate one way or the other.
Many of the other adjustments necessary such as transitional arrangements I thought were obvious and hardly needed mentioning.

Well that’s a rough summary.

I don’t think I would have changed my submissions following the hearing, so I have attached them (or the link to them). The other submissions are worth reading.
I still find it hard to believe that Computershare were not in favour of the amendment given the number of public company registries they handle.
I thought Registry Direct’s submission was brief and good.
I’m surprised also that Freehills made some pretty loose comments in their submission about things that are already not permitted under the Corporations Act.
AMP’s submission is worth a glance to see why the company faces some future strategic questions itself if the average age of its client base is 75!

B. The auditor (Deloitte) should be worried - two members following this one up

Two members are following up Deloitte and ASIC in relation to the auditor and their reports. I shall leave perhaps for them to fill in the details when they think it appropriate. But suffice here to say that the actual audit report in relation to CPA Australia and CPA Australia Advice is a cause for concern (for the auditor that is), and also the s202B statement in relation to directors fees.

Apart from issues that may flow from this, I would think CPA Australia should be changing auditors.

C. We do not want a whitewash

The one thing that I, and most of the members I am in contact with do not want is a whitewash by the Independent Panel. We want to see some proactive and firm action. My sympathies are not with the CPA leadership, and I suggest the Independent Panel needs to be realistic and not too taken in with their sales talk. It has been very effective for over 8 years. Now is the time to correct the wrongs, and if that means actions against them so be it.
Please do not come up with a ‘we need to review remuneration , or review corporate governance, or rethink our strategy as an accounting body’. We all know that. What has been exposed needs action and redress where appropriate.

D. Lets get this board spill asap

Here is the link to sign up. The sooner we force this EGM to get this current board removed the better.
The people organising (Jen, Glen , Andrew and Chris) this also have an update which you can refer to on the website cpamembers.org.

The one thing that I, and most of the members I am in contact with do not want is a whitewash by the Independent Panel. We want to see some proactive and firm action. My sympathies are not with the CPA leadership, and I suggest the Independent Panel needs to be realistic and not too taken in with their sales talk. It has been very effective for over 8 years. Now is the time to correct the wrongs, and if that means actions against them so be it.

As they're reporting to the CPA board it will be something close to a white-wash. If they present their report to the board in draft form, then we need to be told what parts were removed and what parts were inserted.

Please do not come up with a ‘we need to review remuneration , or review corporate governance, or rethink our strategy as an accounting body’. We all know that. What has been exposed needs action and redress where appropriate.

In view of the time frame and the terms of reference, that's probably all we'll get. Nothing will happen until the board goes.

Does the Senate Committee know that there's a board election at the end of September, and that none of us, not one, will have a vote?

As they're reporting to the CPA board it will be something close to a white-wash. If they present their report to the board in draft form, then we need to be told what parts were removed and what parts were inserted.

They are supposed to be reporting directly to the members. The board will get it at the same time as the rest of us.

It was originally stated that they would report to the board but that was changed. Just another stuff up to originally announce it like that.

Thanks Brett for the very detailed update. You were curious about the governance structures of other organisations at the hearing and I did have a look at AICD.

AICD has a federation structure like CPA with state based Division Councils each of which gets a director on a national board. The national board can also appoint directors to itself. That’s not unusual but less common are the time limits for directors of two terms or six years. That can keep a board fresh and allow for new blood and points of view. The directors determine the process for electing or appointing members to the division councils. Half the division councilors are elected by members and half appointed by the council.

What is interesting is I would have thought many company directors are or have been in the AICD at some point so presumably are all ok with this?